The Tribunal declines to dismiss the proceeding summarily.

The Tribunal makes no determination as to whether the applicant's claim is barred as alleged in paragraph 1 of the Points of Defence.

The compulsory conference, directed by the Tribunal's order dated 29 November 2005, shall proceed.

In their Points of Defence in this proceeding the respondents, W.B. and B.M. McColley, contended that the claim by the applicant Resolution Adventures was statute-barred. Having been served with the Points of Defence, the applicant Resolution Adventures asked the Tribunal (by letter) to determine, at a preliminary stage, whether the contention was correct. Accordingly the Tribunal listed a preliminary hearing for 28 February 2006.

I presided at the preliminary hearing on that day. Mr Chris Fenner, a partner in the applicant firm, appeared on the applicant's behalf. Mr Travis Mitchell of Counsel appeared, by leave, on behalf of the respondents. At the end of the hearing I reserved my decision.

The applicant's written application to the Tribunal, claiming $60,800.00, was filed on 9 August 2005, that being the date on which the applicant paid the filing fee. The claim or dispute was stated in the application to relate to "supply of hydraulic equipment not satisfactory for purchase". In attachments to the application more information was given. The equipment was explained to be for the applicants' sailing catamaran and was described as two hydraulic pumps designed to be driven by a central motor, plus two hydraulic motors each of which was designed to be coupled to a propeller. The equipment was said to have been purchased from the respondents "in 1998" but not "commissioned" until "late 2003, early 2004" when it was installed by a person other than the respondents; "the hydraulics were first run on 28 December 2003." The system was extremely noisy once operated. The person who installed it did some investigative work and gave an opinion that the equipment was too small for the boat and its motor, had a life of 400 hours only, and needed to be replaced. The applicant's claim was for the cost of the replacement system plus other alleged consequential losses.

The principal complaint made, in the written application and the attachments, was that the respondents had assured Mr Fenner of the applicant that the equipment they offered to sell was quiet and would last for 30,000 hours, and that the applicant had purchased the equipment in reliance upon those assurances. Points of Claim filed by the applicant on 8 December 2005 alleged that the hydraulic system purchased by the applicant from the respondents was "not reasonably fit for the purpose" (and "the purpose" was apparently to be compatible for use with the boat's 120 horsepower diesel engine running at 2,200 revolutions per minute), and also alleged in paragraph 9 as follows:

9.1. Provided negligent advice to the applicant on the recommendation and supply of a hydraulic system to drive a 50 foot catamaran,

9.2 Failed to take reasonable care when recommending and applying a hydraulic system to drive a 50 foot catamaran."

The respondents filed Points of Defence dated 9 January 2006. Paragraph 1 alleged that the applicant's cause of action was barred by section 5(1)(a) of the Limitation of Actions Act 1958 (Victoria) because the cause of action accrued more than six years before the application was filed. Paragraph 2 raised various alternative defences, including a defence that some of the equipment was sold not to the applicant but to another person, Cull Fisheries.

By its letter to the Tribunal which asked for a preliminary determination of the limitation-of-actions issue, the applicant asserted, in effect, that although the equipment was defective at the time that it was sold and delivered in 1998 the applicant did not become aware of the defects, and had had no opportunity to become aware of them, until the equipment had been "tested" at the end of 2003.

Neither party tendered any evidence at the preliminary hearing, but Mr Mitchell invited me to determine the issue by assuming, for the purpose of the preliminary hearing only, that the matters alleged by the applicant (in the written application and the attachments to it, in the Points of Claim and in the applicant's letter to the Tribunal) were true. I have done that. I record that the Points of Defence alleged that some of the equipment was sold and delivered in June 1999, and that the applicant apparently accepts that that was so.

In his submissions to me Mr Mitchell identified, correctly in my opinion, three possible causes of action that could arise from those matters alleged by the applicant. The first was a claim for damages for breach of contract, the breach being of express or implicit terms of the contract of sale as to the quality of the goods to be supplied. The second was a claim for damages for negligence, being negligent advice or a failure to take reasonable care when making recommendations to the applicant, as outlined in paragraph 9 of the Points of Claim. The third was a claim under section 37 of the Fair Trading Act 1985 (Victoria) for damages for loss caused by misleading or deceptive conduct (in the form of statements made by the respondents as to the compatibility and length of life of the proposed hydraulic equipment) in contravention of section 11 of that Act. Each of those possible causes of action would give rise to a "consumer and trader dispute" which, under part 9 of the Fair Trading Act 1999 (Victoria), the Tribunal has jurisdiction to hear and determine.

For each of those first two possible causes of action - breach of contract and negligence - the limitation period prescribed by the Limitation of Actions Act is six years from the date that the cause of action accrued. For the third possible cause of action - the claim available under the Fair Trading Act (1985) - the limitation period prescribed by section 37 of that Act is three years from the date that the cause of action accrued. A proceeding that is commenced after the expiration of the limitation period allows a good defence that the claim is barred by statute.

A cause of action for damages for breach of contract accrues at the date of the breach. When the alleged breach is of a term as to quality or fitness of goods, the cause of action occurred on the date of delivery of the goods: Handford, Limitation of Actions : The Australian Law (2004) para [23], p. 36. Although the applicant's documentary material referred to above does not specifically state when the equipment was delivered by the respondents, I infer that it was delivered soon after it was purchased "in 1998" (or in June 1999), and on a date which was more than six years before this proceeding was commenced. It is clear that the first possible cause of action for damages for breach of contract is statute-barred.

A cause of action for damages for negligence accrues at the date on which loss or damage resulting from the negligence is suffered: Handford, op. cit, para [36], p. 49. Whether the second possible cause of action is statute-barred depends, therefore, on whether the applicant suffered loss or damage on the date that the equipment was delivered - which was a date more than six years before this proceeding was commenced - or on the date when the equipment was discovered by the applicant to be defective, which was a date within the limitation period.

Where the loss or damage that is alleged is pure economic loss, identification of the date on which the economic loss was suffered becomes difficult. The cost of rectifying a defective building, and other financial losses that might flow from there having been defects in a building, are pure economic loss. Likewise, the cost of rectifying defective goods, and other financial losses that might flow from there having been defects in goods, are pure economic loss. Before developments in Australian law occurred in the mid 1980's the law appeared to be that the economic loss occurred when the defects occurred, not when the person complaining of the loss became aware of the defects. Those developments commenced with a case involving a defective building: Sutherland Shire Council v Heyman ((1985) [1985] HCA 41; 157 CLR 424. In that case, Deane J. held (at 503 - 505) that the economic loss that resulted from inadequacy of foundations was the diminution of the market value of the premises, and that the diminution occurred only at the time when the inadequacy was first known or manifest. That analysis was followed in Hawkins v Clayton (1988) 164 CLR 539 and Bryan v Maloney (1995) 182 CLR 609.

In Hawkins v Clayton (above), however, the majority in the High Court rejected a submission that, by way of a qualification to the general rule that time begins to run when damage is sustained, in cases of economic loss time does not begin to run until the date the person complaining of the loss discovers it or could reasonably have discovered it: Handford op. cit., para [65], footnote 3, p. 95.

Does the analysis by Deane J. in the Sutherland case apply to a case of defective goods, as well as to a case of a defective building? I am not aware of any authority in which that question has been answered. At first sight there does not appear to be a logical reason for distinguishing between a person who acquires a defective building and a person who acquires defective goods so that the first person's cause of action does not accrue until the person becomes aware, or ought to have become aware, of the defect, yet the second person's cause of action accrued when the defect actually occurred. Perhaps the reason lies in the fact that the law now recognises that a builder of defective premises can become liable to compensate for economic loss a purchaser of those premises who was not the person for whom they were originally built (Bryan v Maloney, above), but the law has not (or not yet) recognised that a manufacturer of defective goods can become liable to compensate for economic loss an eventual purchaser of them who was not the person to whom the manufacturer sold them. Alternatively, perhaps the special rule that derives from the analysis of Deane J. in the Sutherland case is applicable not simply to cases of defective buildings as such but is applicable rather to cases where the economic interest that is infringed is the market value of a thing (as distinct from, for example, the cost of repairing it).

The difficult issues discussed above were given only brief treatment in the preliminary hearing before me. The applicant was not legally represented and made no submission that supported the position that it put forward, namely, that the cause of action in negligence accrued only when in late 2003 it discovered that the equipment was defective. Mr Fenner disavowed any desire to seek legal advice in order to develop such a submission. Mr Mitchell properly reminded me of the "defective buildings" cases and submitted that they were not applicable in the present case, but referred me only to one other case which had nothing to do with defective goods or allegedly negligent advice as to the suitability of goods. The respondents' submission, of course, was that the second possible cause of action accrued when the equipment was delivered and that the cause of action was statute-barred.

A determination that the applicant's claim is statute-barred would justify the use of the Tribunal's power under section 75 of the Victorian Civil and Administrative Tribunal Act 1998 to make an order summarily dismissing the proceeding because it is misconceived or lacking in substance. The Tribunal should exercise this power only in a clear case, where it is absolutely clear that the limitation-of-actions defence must succeed. This is not a clear case. The dates on which various events occurred may be clear but the identification of what loss or damage occurred, and when it occurred, is not clear, and there is room for debate as to the applicable law. I am inclined at the moment to the view that insofar the applicant's claim is one for damages for negligence it is probably statute-barred because the loss or damage claimed will turn out to be something other than diminution of market value so that the Sutherland principle is not applicable and the damage will have occurred at the date of delivery of the equipment. But that is a tentative view expressed without my having had the benefit of the substantial argument, on both sides, which I consider that the case deserves. Moreover, the reported cases, including the one cited to me (Magman International Pty Ltd v Westpac Banking Corporation [1991] FCA 41; (1991) 104 ALR 575) warn of the danger of deciding limitation-of-actions issues at a time earlier than the time of the trial of the case, and before all the evidence, which would enable identification of precisely what economic interests had been infringed, was able to be considered.

For those reasons I am not prepared to determine, at this preliminary stage, that the applicant's second possible cause of action is statute-barred.

As to the third possible cause of action, based on contravention of the Fair Trading Act 1985, Mr Mitchell was ready to address me but I told him that I did not wish him to do so. I told him that because I thought at the time that it was clear that a claim relying on that third possible cause of action was statute-barred. On reflection since the hearing I now doubt that it is so clear that such a claim is statute-barred. In view, however, of the conclusions I have expressed, about the second possible cause of action, it would be pointless to invite further argument at this stage about the third possible cause of action.

I propose therefore to order that the proceeding should not be dismissed summarily, that the Tribunal makes no determination at this stage as to whether the defence taken in paragraph 1 of the Points of Defence bars the applicant's claim, and that the compulsory conference directed by the Tribunal's order dated 29 November 2005 should now take place. The

respective risks that the Tribunal may decide, at a final hearing, that the applicant's claim is statute-barred or that it is not statute-barred, are matters that the parties ought to bear in mind at the compulsory conference.